Few divorces are straightforward, but when numerous high-value assets are involved, disputes are more likely during the property division process.
Such divorces can take years to fully resolve but, with the help of high net worth divorce lawyers, the process can be less time-consuming, less adversarial, and less expensive in the long run.
The focus should be on resolving matters as comprehensively, amicably, and privately as possible, using alternative dispute resolution methods rather than court judgments.
Let us take a look at why property division in high-net-worth divorces is often more complex and how legal representation can avert many of the issues associated with these types of divorces.
High net worth divorces: The basics
The main reason why high net worth divorces are more complex than standard divorces is that the financial stakes are higher. The same divorce process applies and a judge will not finalize the divorce until the main issues are all resolved, such as child custody and parenting, property division, child support, and spousal support.
With a high net worth divorce, the value of the assets typically runs into the millions of dollars. Depending on the circumstances and length of the marriage, the assets of both spouses may have become commingled, with assets brought into the marriage mixed with those accumulated during the marriage.
Sometimes, both spouses have careers or businesses or one spouse may have sacrificed a career to be a homemaker while the other spouse pursues a lucrative career.
These factors and others can complicate divorces because the financial situations of the spouses must be unraveled and separated, and the future needs of the children and each spouse addressed. The existence of marriage or cohabitation agreements may further complicate matters.
According to Alberta’s Family Property Act, the marital estate must be divided fairly and equitably. However, in high-stakes divorces, the lower-asset spouse or the children can suffer financially from the separation unless matters are carefully managed.
Common types of high net worth divorce assets
High net worth divorces require the valuations of often complex asset portfolios, including real estate, pensions, investments, and business assets.
Most high net worth divorces involve some or all of the following assets:
- Real estate portfolios, including residential and commercial properties that require a professional appraisal to value.
- Family-owned business/corporate shares, requiring a specialist valuation from a professional business valuator.
- Investments, such as stocks, bonds, hedge funds, and retirement funds like RRSPs.
- Luxury assets, such as collections of art, jewelry, vehicles, and other collectibles, requiring specialist appraisals.
- International and offshore holdings, which may require the involvement of international tax experts.
How do marriage and cohabitation agreements affect high net worth divorces in Alberta?
When high net worth individuals get married or enter an adult interdependent relationship, cohabitation agreements or marriage contracts are often introduced. This allows the parties to pre-determine what happens to assets if they separate, protecting certain property rights and financial interests as long as the agreement complies with the Family Property Act.
Often referred to as “prenuptial agreements” or “postnuptial agreements”, marriage contracts and cohabitation agreements allow spouses to set out their own rules about financial and property matters, rather than relying only on the default rules in legislation.
Among the asset division matters typically addressed by such agreements are the following…
How will family property be divided?
How exactly will the types of property outlined above and accumulated during the marriage be divided? Provided the agreement remains within the general provisions of Alberta family law, spouses can agree to any distribution of property—as long as it is deemed fair and reasonable.
What constitutes “excluded” property?
The spouses can agree on what counts as “excluded” property, which is not subject to division upon separation under the Family Property Act. This might include property owned before the relationship began, gifts received by one party, and inheritances.
The need for full financial disclosure
A marriage or cohabitation agreement should specify the need for full financial disclosure before it is signed. If either party is guilty of hiding assets, liabilities, income or expenses, the agreement can be challenged in court.
Furthermore, these types of agreements are only valid and legally enforceable in Alberta if the following additional requirements are met:
- Fair and reasonable terms: Unequal division of property or non-standard spousal support arrangements are acceptable unless the terms are so unfair as to be considered unconscionable.
- No duress: Neither party must be placed under duress to sign the agreement and must do so voluntarily.
- Independent legal advice: Both parties must seek independent legal advice from separate lawyers before signing the agreement, so that they understand their rights and obligations.
Dividing business assets during divorce in Alberta
Sometimes, a family-owned business must be included as an asset during the property division process. This can greatly complicate matters and require specialist help to resolve. It is helpful to understand what the Alberta courts consider when attempting an equitable division of business assets…
The value of the business
First and foremost, an independent and professional valuation of the business should be conducted for a fair estimate of its value according to the latest financial statements, market conditions, industry trends, and other relevant factors.
The contributions of each spouse
The roles and contributions of each spouse in the business will also be considered. This might include direct contributions from working in the business but also indirect contributions, such as providing financial support or managing responsibilities in the marital home or raising the children.
The options available for the division of the business
Dividing a business fairly without causing operational issues can be challenging unless there is an option for one party to buy out the other. Another option is selling the business and dividing the proceeds but either way, careful planning, financial analysis, and experienced legal expertise are usually required for a reasonable outcome.
How can you achieve privacy and fairness during property division?
The best way for high-net-worth families to keep matters private during the asset division process is to avoid the court, where matters become part of the public record.
Alternative dispute resolution methods such as mediation or arbitration are preferable to litigation. In addition to being more private, these methods are less formal, more flexible, and can help keep the decision-making powers with the spouses (in the case of mediation).
With mediation, a neutral third-party mediator facilitates discussions in an attempt to resolve the disputed property division matters. Arbitration involves a qualified arbitrator listening to evidence and making a legally binding decision on the reasonable allocation of assets.
Another effective method of fairly dividing assets without litigation or public disclosure is a collaborative divorce. Each party hires a lawyer and negotiations are facilitated to try to reach an agreement about any disputed matters. Sometimes, the intervention of specialist accountants or other professionals may be required.
How a Calgary high net worth divorce lawyer can help
A high net worth divorce lawyer can help you address all of the major issues that may arise with property division. Early intervention at the time of separation can prevent issues from escalating by considering the following:
- Whether there is an executable marriage or cohabitation agreement in place.
- Marital assets or liabilities vs separate assets or liabilities.
- Valuations of marital assets and liabilities.
- The increase in value of assets brought into the marriage until the date of separation.
- Any inheritance or gifts acquired during the marriage.
- The tax implications of property division decisions.
- Any business, corporate or trust issues that need unraveling.
- Whether there is an estate plan in place that needs amending.
A seasoned high net worth divorce lawyer can help you protect assets, make informed decisions, and lay the groundwork for your future financial security.
If you live in the Calgary area and need assistance with a high net worth divorce, the experienced lawyers at Jennings Family Law can help you. Call (403) 316-0138 to request a confidential consultation, contact us directly online, or email Warren Jennings directly at warren@jenningsfamilylaw.com.
